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Saturday, June 16, 2012

Groceries Online, Will it Click?

Connaught Place, bang in the heart of Delhi, isn’t normally the kind of place where you’d expect an online grocer to set up shop. Real estate is prohibitively expensive, traffic and parking can be maddening and it’s far away from Gurgaon’s dense and rich urban jungle.

Yet, that is where AaramShop, one of the fastest growing online grocers currently is headquartered.

It can afford to do so because, unlike most of its peers, it has no need for large warehouses, call centers to take orders, engineers or logistics staff. It has just 12 employees.

Yet, it home delivers grocery orders in over 25 cities.

In comparison, BigBasket, that serves just Bangalore city, has over 120 employees, three distribution hubs and 25 delivery vans.

Aaramshop’s secret: It does not source, stock or deliver any or the products ordered by customers. Instead, it acts as the internet face for any neighbourhood grocery store (kiranas) that signs up with it.

“We believe e-commerce in its traditional form will not work with FMCGs [fast moving consumer goods] and groceries. Because unlike other categories, the margins available to retailers here range from 6-8 percent, which makes stocking and logistics of groceries and perishable products a near impossible task,” says Vijay Singh, 42, AaramShop’s founder and CEO.

Customers who log in to AaramShop must select the kirana store nearest to them before ordering any products. Within seconds, AaramShop relays the order via SMS and email to the kirana. And within hours the kirana delivers the order, with the customer paying in cash. The average order size a kirana gets through AaramShop is around Rs 570, says Singh, compared to Rs 100 when customers were directly calling them up.

“The fundamental advantage of the kirana is their proximity and huge amount of trust with consumers. Besides, the view most of us have of the kirana store manned by an old gentleman wearing a banian is no longer true. Having seen the Subhiksha model, there is huge interest in them to change. Counters have changed, aisles have come in and most owners use high-end smartphones and Facebook,” says Singh.